Here’s the latest on the status of health insurance for Washington State residents and employers.

The Health Insurance Affordable Care Act [PPACP] was passed in March of 2010, with various provisions of the act being implemented over the next several years. There are three large pieces to the act. 

1. THE HEALTHCARE ACT REQUIRES INDIVIDUALS TO PURCHASE HEALTH INSURANCE STARTING IN 2014.   This has always been a contentious [understatement!] part of the act and is being challenged on constitutional grounds in several federal jurisdictions. Washington State is one of more than 20 plus States that have filed suit to prevent the law from being enacted. In the cases heard so far, some Judges have ruled in favor of the act, saying it is in fact constitutional, other Judges have ruled otherwise. Not a good situation.  The Obama administration has [finally] asked for an expedited hearing from the Supreme Court. The Supreme Court has taken the case and we can expect a ruling in the fall of 2012.If the Supreme Court overturns the requirement for individuals to purchase coverage, it will have a huge impact on how the marketplace is scheduled to function. 

2. HEALTH INSURANCE EXCHANGES MUST BE CREATED.  Health insurance exchanges will be established by individual states. If they fail to establish an exchange, the citizens of that state will be allowed to take part in some sort/form of a Federal exchange. The exchanges will be mandated to offer at least a basic “package” of coverage.  The exchanges will be available for individual and group coverage. The specifics of what will be covered and what will be excluded are currently being discussed/debated. The exchanges will be guarantee issued plans, meaning no underwriting will be allowed.

The exchanges as being designed, to my knowledge, are NOT designed to cut the cost of medical care, nor the cost of health insurance premiums. The advantage of the exchanges, in concept, is to allow individuals and companies to get better coverage for less… just because they will be part of a larger group.  The most major change though is: WHO PAYS THE PREMIUMS!!!

Everyone who falls below 400% of the Federal poverty level will be entitled to a subsidy of at least a portion of their premiums. Currently, that would mean that every family of 4 who earns less than $85,000, will be partly subsidized. For those who make a lot less, they  will receive a larger subsidy. If a family of 4 makes 200% of the federal poverty amount, they may be entitled to a 50% subsidy of their premiums.  So, make no mistake. For those of us who are currently insured in a group plan, if the reform act is fully implemented in 2014. Employers will almost certainly be forced to buy the group coverage from the exchange. Last time I checked, my employers cannot compete with “free money.”
 
3. THE LONG TERM CARE FEATURE OF THE PLAN [CLASS], HAS RECENTLY BEEN ABANDONED.

This was deigned to collect 80 billion dollars over the next few years, before the plan would be obligated to pay benefits. This 80 billion was counted as “savings” in the budget for the PCACC in the next decade. It’s now gone. The question remains: Is this PPACC sustainable given the pressures on our Federal budget and given the political climate, will it be repealed if we have a Republican President and congress? We live in interesting times.


KEEPING YOUR COSTS DOWN
 
Not knowing how it’s going to play out, long term most employers are interested in what they can do TODAY to keep their cost down, and still be able to offer quality medical insurance to their employees.So to that end, this email will focus on how the current marketplace in Washington and will focus on the options available to the small and medium sized businesses… in the “FULLY INSURED” marketplace.
 
One of the biggest myths is that larger employers pay less for the same coverage as smaller employers. Not true. It’s possible, but certainly not a guarantee.The most important factor that affects costs is the age of your employees. The younger the group, the lower the premiums are. Another factor is the health of your employees. If you have a healthier than average group of employees and you can demonstrate that to the insurers, you should get rewarded with lower premiums. If you’re in what is known as a preferred industry, that can result in lower premiums. If your employee base is mostly male, that can lower your premiums.So, if a group is not a healthier than average group, is in a non preferred industry, is mostly female, they should probably be purchasing their coverage from one of the community pools.  There are three: Regence, Premera and the Group Health Coop. Community pools are for those employers who have one or more employees but less than 50 employees. These community pools are heavily regulated and must follow certain rules. The most important is that the pools can use only THREE FACTORS when rating: The age of the employees, where they live and the number and ages of the enrolled dependents. NO UNDERWRITING/Health Screening allowed, and claims experience is not a factor when the insurer rerates for renewals.

Many associations offer group medical insurance for their members. Almost every employer can “qualify” for an association plan. Association plans contract with the insurers [Regence, Premera. Group Health, United Heathcare, Aetna] to pay claims, use their network of providers, and they can design specific plans for their members.  Association plans differ from community pools in that:  1. They are allowed to underwrite. 2. They can ask questions of the employer or individual employees before they will offer terms of coverage. 3.They can and do use industry classes and gender when offering terms for both the initial contract and renewals. If a group is not a healthy group, and the associations insurer is confident that the claims are going to be higher than average, I’m equally confident that the initial or renewal rate will be in EXCESS of what a community pool can offer. So the unfortunate but necessary process in making sure you’re receiving the best value for your premium dollars is to “shop” your account to the various insurers each year.

One interesting observation after 30 plus years experience is that each insurer in Washington operates in a somewhat cyclical fashion. The insurer may be extremely competitive for a few years, even operating at a loss [premiums collected are less than expenses and claims] and then decides they must raise premiums significantly in order to stay in business. The association plans operate in much the same way being cyclical in how they are pricing their plans.  My old joke is “Never fall in love with any insurer, but it’s OK to fall in love with your broker.” 
 
One interesting trend I’m seeing in the industry is in the new interest in QUASI-SELF INSURED plans.  Most small and medium sized companies, with less than 100 employees are not willing or able to purely self insure. With a self insured plan, the employer contracts with a third party administrator [TPA] to pay medical claims on behalf of the employees. The employer reimburses the TPA for the claims incurred/paid. For smaller groups, this can be pretty scary, because at any time one of the employees or covered dependents may have a $1,000,000 plus claim. The employer can limit their exposure by buying “stop loss” coverage, meaning they will pay a certain amount per employee to an insurer who promises to pay any costs in excess of an agreed amount, for example $50,000 per claim. When an employer self insures, they have the potential to either save money [compared to a fully insured plan] or to lose money, depending on their claims experience.

A Quasi-self insured plan may be of interest to small and medium sized employers. These plans offer the employer the chance to save money if they have a good claims year, but also limits the employers losses by establishing a reasonable stop loss limit AND a total loss limit no matter how bad the experience may be.  The employer however would not have an unlimited liability. We’ve had these plans available in limited scope for years. The problem, in my opinion is: The savings haven’t warranted the risk in most cases. The administration costs have been very high. Getting “out” of these plans, once started has been brutal. Employers have been less than enthused with the service of the plans.

Well, it’s a new world. Technology should be able to reduce costs, increase transparency, and there are several insurers who have excellent reputations now offering quasi-self insured programs. So, this is in fact a new tool available for smaller groups that should be considered.
 
Please do not hesitate to contact me if you have any questions or if I can help you in any way.  
 
All the best,

Roger Young
Balcos Insurance Inc.
8746 Mary Avenue NW, Suite 2
Seattle, Washington 98117
Office:(206)783-1986
www.balcosinsurance.com